Saturday, March 21, 2009

credit culture (2)

- cover the type of risk the bank is prepared to take and the reward it expect to earn for given levels of risk , both at the individual lending and portfolio level ;
- establish the relative status and authority of the credit risk function in the bank.There must be clarity over the extent that credit has a veto over the activities of the business developers .The support of top management in maintaining the agreed authority is essential;
- be willing to pay the cost of maintaining the culture.This includes training analysis , monitoring,the quality of decision-takers,computer systems and other elements. But cost here cannot simply be calculated in cash terms ; it also covers willingness to overcome and customer as to the benefits of a sound credit structure and ultimately to lose business if the customer proves uneducable ;
- be robust enough not to be effected by economic cycles . A culture that changes in response to different economic cycles . A culture that changes in response to different conditions is a weak one .

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